Markets up after Chidambaram assurance, strong global cues (Roundup)

Mumbai, Sep 18 (IANS) Despite huge early losses, Indian equities markets Thursday staged a smart recovery to close with gains on strong buying by domestic institutions following assurance of adequate liquidity by the Indian finance minister and positive global cues.The 30-share benchmark sensitive index (Sensex) of the Bombay Stock Exchange (BSE) closed at 13,315.60, gaining 52.70 points or 0.40 percent over its previous close of 13,262.90 Wednesday after opening Thursday with a crash of more than 700 points.

The broader based 50-share S&P Nifty of the NSE also ended the day with a gain closing at 4038.15, up 29.9 points or 0.75 percent against its previous close at 4,008.25 Wednesday.

It too had opened nearly 200 points down.

“There was strong buying with high volumes in Reliance, HDFC Bank, State Bank of India, Larsen & Toubro and other banking stocks,” said portfolio strategist and US-trained chartered financial analyst Manoj Krishnan of Delhi-based Price Investment Management and Research Services.

“Central banks of Japan and the US and the European Central Bank decided during the day to nearly quadruple their liquidity support levels to $247 billion up from $67 billion normally,” said Jagannadham Thunuguntla, head of capital markets of India’s fourth largest securities brokerage firm, the Delhi-based SMC Group.

The additional liquidity helped to ease the credit crunch in the money markets and the London Interbank Offered Rate (Libor) came down Thursday to 3.84 percent.

The Libor had shot up to 5.03 percent Wednesday, Thunuguntla said.

“Indian call money rates (weighted averages) have also cooled down to around 10 percent today and yesterday after shooting up Monday to 10.59 percent and to 13.07 percent Tuesday from the normal 7 percent or so,” he said.

The reason was money had been sucked out of the system as Sunday, September 15 was the last day for filing advance tax for corporates, he said.

“All these factors introduced a feeling of relaxation and there was hope that global central banks will now help to stabilize the financial system resulting in the smart recovery on the stock markets,” he said.

The BSE opened with the Sensex crashing by more than 700 points on extremely weak global cues as the Dow Jones industrial average closed Wednesday with a 440-odd points loss. All other European markets had also finished in the red.

Asian markets also showed losses Thursday morning with the Hang Seng index of the Hong Kong stock market losing 7.5 percent over its previous close Wednesday.

“This led to punters entering the market with a gloom and doom outlook but with domestic institutional buying and the finance minister’s statement assuring adequate liquidity together with positive cues from major global central banks, there was recovery,” Krishnan said.

The S&P Nifty too had opened nearly 200 points down but recovered enough to close in the green zone.

The BSE mid cap index, however, failed to recover enough to wipe out losses completely and closed at 5,079.13, down 60.50 points or 1.18 percent over its previous close at 5,139.63 points.

The BSE small cap index too failed to recover enough and closed at 6,075.43, losing 139.32 points or 2.24 percent against its previous close at 6,214.75.

“Major buying was restricted to only about 70-odd stocks,” Krishnan said explaining the failure of smaller stocks to recover as much as those in the Sensex basket and other large cap stocks.

“The underlying sentiment is still weak due to uncertainties about the future,” Thunuguntla said.

“Another leading financial services firm Washington Mutual of the US has decided to put itself up for sale while Morgan Stanley is also considering a merger with a commercial bank,” he said.

“All this indicates that the fallout of black Monday is not over yet and punters are still nervous,” he said to explain the lack of full recovery by smaller stocks.

Sectorally, banking, oil and gas, capital goods and power stocks were the top gainers.